A Penny Saved

As titles go, this one gives away far too much. After all, would any of you even bend over to pick up a penny? It’s not worth the effort. And yet so many of you struggle to get by. Some are starving, reading Lawyerist in the hope that you will learn something useful so you can eat dinner again tomorrow. But they won’t bend over for a penny. That’s beneath them.

It’s exasperating reading your thoughts as reflected in the comments. I sat down with a judge two days ago, an older gentleman who survived a very successful practice. Our discussion eventually reached the new lawyers in his courtroom. He asked me how they afford all the toys they carry. I told him I didn’t know. We ran through the monthly cost of the various necessities du jour, and each of us winced in unison.

It’s understandable, in an immature way, that young lawyers want to carry what they perceive to be the cool accoutrements of their position. It is not understandable, however, that they lack a basic understanding of economics. They don’t have a firm grasp of the fact that every dollar you ship off to your cellphone company is one less dollar you put into your pocket.

This is true for the graphic designer of your logo. This is true for your case management software. And every thing you have that you paid or pay for. It’s your money being given to others. Does it come back to you? Is there a return on investment? Is there a return on equity? Or is it just something you want or someone told you to get, and so you do?

If you can accomplish a task without spending any money to do so, then the money you didn’t send away remains yours. This is a basic business concept. It’s called profit. It’s the difference between what you bring in and what you pay out. Profit is yours to keep and do with as you please. Have dinner. Buy a home. Feed your children. Have a beer. Whatever. But it’s yours.

If you really want that iPhone badly enough, buy it, but don’t lie to yourself that it’s a business necessity. It’s vanity. It’s a toy that pleases you. Great, as long as you realize that’s what it is. And you can afford such affectations. But if you choose to give your money to Apple, don’t complain about the cost of milk or the debt service on your student loan. It was your choice to use the money for vanity rather than necessity. You got what you wanted, so you have no cause to whine.

The notion of what is needed to start a law practice is not only remarkably different today, but downright scary. A logo? Case management software? These are frivolous. You may want these, but you certainly don’t need them. The marketers tell you to brand yourself? That’s how they make a living, telling foolish children nonsense.

And you have so very many cases that you can’t keep track of things with a pen and paper? Like they did for centuries before you arrived? Are you that busy, or is tracking cases in a diary that difficult? If so, your problems go much farther than needing software, and you should seriously consider a new occupation.

If you want to spend money like a drunken fool, by all means do so (as long as it’s your money). But don’t think this relates to any necessity, either to starting a law practice or representing clients. You’ve been sold a world of shiny toys by people who want your money and are busy testing whether you are stupid enough to fall for their scheme. If you do, at least have the dignity not to whine about how you aren’t making a living.

From what I read here, most of you don’t have the slightest grasp of the money you are wasting on crap. Not only is it sad for you, but the implications for anyone who thinks your advice is trustworthy is terrible. If you can’t manage your own business, then where do you come off thinking you can advise anyone else’s?

I’m not sure that I necessarily agree with all of this. Some of these things are certainly frivolous, like the logo design. It’s extremely easy to create a logo these days – my Dad even managed to make one, and he is by no means a skilled artist or graphics designer. I’m not even convinced that most attorneys really need a logo, to be honest. Another service that I’m not entirely sure is worth it for starting lawyers is a virtual receptionist. If you don’t have enough cases, you should have plenty of time to answer the phone yourself.

Conversely, some of these expenditures are simply increasing an already-necessary expenditure, or replace something else that would cost money. Everybody needs a mobile phone – an iPhone isn’t a *huge* investment on top of a standard phone bill, but it does confer several benefits, such as the ability to easily perform legal research in courts where there is no wi-fi. I know from personal experience that being able to quickly find a case that you didn’t anticipate needing before a hearing can be quite handy. In regards to practice management software, keeping track of your cases using paper, as you suggest in your post, involves buying filing cabinets, copiers, ink, folders, lots of extra paper and a variety of other things. It may be almost as cheap just to start out using that software.

Overall, I agree, it’s best to keep your starting overhead low. However, a few extra expenditures here and there are can be worthwhile.

I really enjoyed this because it definitely felt like a speech my grandfather (a former tobacco farmer) would give to me about money management. That being said, even my grandfather would acknowledge that he achieved much greater efficiency with a tractor as opposed to a mule and saved a lot of money in gas by upgrading his vehicle from a 70s era pick-up truck to a 00s era pickup truck.

I agree with Mark. Josh makes some good points (and manages to sound like my grandfather as well). I’ll chalk up his pearls of wisdom to a good ol’ fashion Midwestern upbringing. However, technology saves me a TON of money and keeps me up to speed with my clients. I try to go cheap when possible, but you get what you pay for. My practice resides within a sturdy laptop, some file drawers and “the cloud.” That keep my overhead low. Yes, I could cut costs by submitting motions on the back of Denny’s placemats, written with the complimentary crayons, but I would have to pay for a meal at Denny’s and I would still have to scan it and file it electronically with the local court. I have found its important to look put together if you are a solo charging a premium for your services. “Branding” and technology help me achieve that. Also, wearing pants to client meetings…

Josh is right to distinguish need from want. I need a computer to draft briefs. I don’t need a top-of-the-line laptop to do it. I need a phone to communicate with clients. It doesn’t need to be a smartphone. I need a way to keep myself organized. It doesn’t need to be on an iPad.

My smartphone and my iPad and my Google Apps account are nice to have, but they aren’t essential. My clients wouldn’t notice if I chucked them and went back to using a landline and a desktop computer all the time.

What worries me as much as the wasted money is the seemingly pervasive idea that you need things in order to accomplish things. It’s the silver bullet complex, the idea that there is a magical solution out there that will make you organized or profitable or well-endowed or good in bed.

For example, I’m constantly hearing from people who think they need software to get organized. That’s backwards. If you get organized, you can choose to use software to complement your organization. But you don’t need to.

You can make arguments for why productivity software is cost-effective, but you don’t need it. If you take the time to organize your business, you’ll do just as well without case management software — and be better for it, even if you decide to adopt software at some point.

Before you start paying for software and gadgets and magic power crystals, learn the fundamental skills necessary to being a lawyer. Then, if you want to buy an iPad or adopt case management software, go for it.

On the other hand, some lawyers are so scared of spending money on anything that it hurts your practice.

Take a colleague out to dinner and pay for it. Organize a happy hour and have a few drinks. Go golfing. Join a practice group in your bar association. Donate some stuff to raffle off for a charity. Buy lunch. You won’t find any new clients sitting in your office.

In addition, I would rather pay the dry cleaner’s $10 a week to make all my shirts look nice instead of having to spend hours ironing them myself. My time is more valuable than that. Is it necessary? Not really, but it sure saves a lot of my time.

That out of the way, I do agree that a logo, case management software, and an iPad / iPhone is a toy rather than a legitimate business expense.

“If you can accomplish a task without spending any money to do so, then the money you didn’t send away remains yours. This is a basic business concept.”

Another basic business concept is that if you can spend X to earn 50X, then it is a good choice. To call case management software–which streamlines my practice enough to allow me to spend more time on revenue producing activities–frivolous is just, well, silly.

“Are you that busy, or is tracking cases in a diary that difficult?”

Well, malpractice carriers prefer case tracking software. What does that suggest to you?

1. Sure his judge friend did not need any new shiny toys, but I would bet the farm that when he was practicing he had or shared a secretary and had a team doing his billing. The shiny toys were of no use to him, because he a staff. Most of the rest of us are looking for ways to practice without that support — the cost of which dwarfs any of the toys mentioned in the article.

2. The gear and software, however, must be cost justified. If you are busy enough, and your rates are ok, then these costs will be ok. But I fear the real cost for me is not the cost of the gear or software, but the time I waste selecting them and trying to get them to work right. The real cost is the diversion from the essentials: generating and doing the work.

Look, I understand – and agree – with this retro trend that law is all about personal relationships, getting out and pressing the flesh and all that. And yes, it is important not to spend more than you can afford. In fact, that’s why many lawyers start out working from home or using virtual law offices – so that they don’t have to think about rent.
But the fact is that many of the expenses used to start up a firm – an iphone and computer, in particular – are items that most new law grads have already acquired in law school, if not high school or earlier. So they really aren’t spending anything extra. Moreover, today’s students – even as early as grade school – are using Google Docs to turn in papers to their teachers, Dropbox to exchange files and the scheduling system on their phones to keep track of dates. Paper and pencil is a good practice management tool if that’s what you’re accustomed to, but most new grads are far more comfortable with tech tools.
Moreover, while practice management tools may cost money, they do save time (again, if you are going to use them). Most practice management tools will automatically generate an invoice from hours entered, which can save several hours. When I started my practice, I would spend a full day on the weekend preparing and invoicing. Now, I can do it in 5-10 minutes.
Finally, clients may not care if you use Google Apps or parchment and quill pen. But they will surely care if your paper copies burn up and you don’t have a copy on back up somewhere.

I would have expected a little more nuance from you, Carolyn. For a particular lawyer, in a particular practice area, any particular gadget or program may well be cost effective and worth having. But that doesn’t make it true for all lawyers in all practice areas with all gadgets and programs.

Given your support for solos, advice like this could be disastrous, making new solos believe they have to dump a ton of money into non-productive things they don’t need, resulting in financial ruin. If the idea of starting a solo practice is to exercise sound judgment so as to avoid bankruptcy or starvation until the practice gets on its feet, then your adoration of stuff seems very bad advice.

And you seem to take your parchment analysis a bit too far. Nobody suggests that having a computer isn’t a necessity for a lawyer today. Whether you need an ultrabook or 16 gig of ram and 10 terrabytes is the question. Are you really urging new solos/lawyers to sink themselves into ruinous financial obligations before they have incoming revenues to justify it? As you advised in Solo By Choice, think long and hard about what you really need before wasting money. Is that advice dead now?

Everything costs money, even if it makes you comfortable or happy. You know what’s not comfortable? Starving.

A little perspective here. Someone complaining about the interest on their loans is probably paying the cost of a new iPad in interest every single month, if not every few weeks. And it’s highly unlikely that a struggling young solo is actually, literally starving in any event. It’s true that, like virtually everyone in the First World (including many homeless people), there is always something you have that you don’t absolutely *need*. But in the grand scheme of things, these tools really aren’t all that expensive, especially for things that you use and rely on constantly and that make your life easier.

I think a lot of this is also driven by the “Kids these days and their newfangled gadgets! In my day a loaf of bread cost a nickel” phenomenon. How much does an iPhone and data plan cost in 1975 dollars, and how does that compare with what a desk phone, pre-deregulation phone service, typical long-distance usage (remember when that was a thing?), Rolodex, folio and pocket calendars, etc. cost back then? Bear in mind that the young whippersnapper in court today probably uses her smartphone as her exclusive phone for work *and* home, so you might as well roll in the cost of a home phone and service as well. And an answering machine/service. In other words, I suspect that when His Honor was a young lawyer, he spent just as many real dollars on communication devices and services. He just got far, far less in return.

No. I do think it is important to be wary of spending money – and actually, if you do have to spend, I would certainly advise paying for a reliable computer research service or a solid, credible CLE rather than practice management. (I should have added that I agree completely that a logo is unnecessary and even if you can get one cheap by holding a “contest,” I don’t like that approach either).
I’m not telling people to go out and buy unnecessary things, but rather, saying that they should repurpose what they have – and if they do, that will be plenty to start out. For better or worse (and I am starting to think worse), today’s grads have more in the way of computers and iphones than those of our generation – and to an older judge, some of this may seem extravagant. Of course, if we are talking about ipads, they are completely unnecessary to law practice. Certainly a want or perhaps a nice way to treat yourself, but that is not how I would tell new lawyers to spend a spare $500.
On practice management tools, it does depend. One problem with the pricing is that if you have a firm with 2 lawyers and an associate, you are looking at nearly $100/month – which is significant enough to evaluate closely. If you use Google Apps (like Jordan, i think) for $50/year, it is more of a no-brainer – if you will actually use it.

Overall, however, I was reacting primarily to this part of the post:

And you have so very many cases that you can’t keep track of things with a pen and paper? Like they did for centuries before you arrived? Are you that busy, or is tracking cases in a diary that difficult? If so, your problems go much farther than needing software, and you should seriously consider a new occupation.

I am simply tired of lawyers being criticized for using a computer rather than a paper to carry out basic functions of practice.

I agree with SHG that it–notwithstanding the general correctness of the truisms in Josh’s post (distinguish wants from needs; don’t waste money on stuff you don’t really need), it is almost meaningless to discuss the issue in generalities. Each practice is unique. My old firm attributed literally hundreds of dollars per hour “overhead” to me. My two laptops (redundantly synched with encrypted SSD drives); Dropbox account; dual-bin dual sided printing laser; high-speed, compact dual-sided scanner; desktop p.c. with dual 24″ monitors; Adobe Acrobat Pro 10.0; Google Aps; Office 2010; online billing solution; LEXIS account and shared office workspace (around $5k captial cost and a few hundred per month in ongoing costs), matches that in about 35 hours the first month, and about three hours per month thereafter. And I use a smartphone anyway. Josh’s principles are correct, but–at least for my practice–he’s got he application all backwards. The new systems/solutions are far more cost-effective than the old, leaving my clients with more money in their pockets and me (potentially) with more in mine.

I’ll bet the judge you had lunch with, when he was in private practice, that he had a library in his office filled with shiny new and dusty old books and case reporters. He probably spent several hundred (if not more) per month on his subscriptions and updates.

If we want to really review the costs of maintaining a practice then and now, there would be no end of the expenses that were considered customary and fundamental to the operation of a law practice that we would consider extravagant or unnecessary today. So I’ll keep my little iPad (from which I can access statutes and case law, all client files which are scanned and uploaded, my email and calendar, and so much more), and the judge can keep his subscription to Shepards. I’ll keep my GoogleVoice account, and the judge can keep the cost of his office’s telephone system.

Well, at least in my case, I already have an iPad which I plan to repurpose for legal work. The only new technology that I *don’t* already have and which I will probably buy early on in my career is a portable printer, due to the fact that one of the counties I will be practicing in is an hour’s drive away from my home (this is an *extremely* rural area), and I think that being able to print motions while in that county would be a handy thing. That’s probably the case for most people of my generation starting law firms, to be honest – maybe not necessarily an iPad, but at the very least a decently-powered laptop computer. Remember, specs that would have been grossly overpowered a few years ago are budget laptops these days. I dare you to find a new laptop with a processor slower than 1.5 GHZ.

Your example makes the really good point that what is important for one attorney to have is merely a fun gadget for another. I would rarely use a portable printer in my practice. You really cannot judge what is useful for another attorney without really understanding their practice.

As Jordan suggested, the analysis is about your return on investment, and that’s not just about cash. Some clients might expect a connected gadget-laden lawyer, especially if you’re courting tech clients or start-ups. And if your confidence and self esteem are boosted by having the latest gadget, that might translate into closing more prospects (in sales, the person with the most confidence usually wins). Have you surveyed your clients to see if these things matter? Are you tracking your various marketing campaigns to see which generate a positive returns, and how you use your various tools (gadgets) with your various campaigns? Everything being discussed here comes down to basic business sense, and it seems like Josh Reynolds is suggesting new lawyers don’t really have any.

Several have had this in comments but it is worth saying again, technology helps a solo attorney compete with the resources of much largers firms. It helps keep track of time. I am old enough to remember having to fill out a time sheet that then got sent to the accounting dept. to be entered. How much did that staff time cost compared to buying or subscribing to a practice managent system?

I also think today if you are practicing without a smartphone, website, etc, you are really putting yourself at a disadvantage. Clients expect you to be reachable. They expect to be able to email you and get a response when you are out of the office. Being able to get a fax and respond on your phone, while waiting for court or another meeting,not makes seem ontop of it and allows to to capture more billable time. Technology has allowed me to go to my kids ball games but yet be there for my client when necessary.

Alos while have not tracked it, I think I have save more in paper in toner by downloading things to read on my tablet than the thing has cost.

Technology has its place if it makes us more efficient or more skilled. But technology for technology’s sake is a mistake.

The very concepts of “necessity” and “waste” as absolutes are suspect. The key concept, regardless of the purchase, is marginal return on investment – what do you get net of your opportunity costs of the cash, or conversely what’s the damage from not spending? Blanket advice to buy or not to buy something is almost certainly flawed for attorneys (with exceptions.) Then again, much of life is about measuring the marginal yield of a decision. Guess waste = no yield or negative yield.

Both phobias and manias about spending money are cries for help, not professional or commercial judgments. The fact that these lawyers are falling into manias and phobias tells me that they need more wisdom, more allies and mentors who are experienced attorneys and especially experienced solos.